CHAPTER ONE INTRODUCTION
Background to the Study
The poultry industry is by far the most popular and rapidly expanding animal meat production businesses globally (Watt, 2010). Law & Payne, (1996) emphasised early on that regarding its progress, influence and significance in the 1990s, the poultry industry is really popular. This popularity is due to its low price, multipurpose and considered to provide great deal of health benefits than red meat. The growth of the broiler industry is evident in developing countries and is more rapid than the growth of other meat industries in the livestock sector (Chang, 2007). According to the (FAO Statistical Year Book, 2006), the 2012 global meat production targeted a two percent expansion of 302 million metric tons in meat production. The envisaged growth will be driven by two sectors; the pork and broiler meat production sectors which reached a record of 100 million metric tons and 101.600 million metric tons respectively in 2011. The bigger crunch of this growth will come from developing countries, specifically Asian countries (Watt Executive Guide, 2012).
Projections from FAO suggests that in the year 2021, the poultry meat market will be 127,000000 metric tonnes compared to the pork meat market share 126,000000 metric tonnes (OECD-FAO, 2015). Meat production worldwide is also anticipated to slow down over the next decade, 2016 to 2025 from previous growth rates. FAO forecasts world meat production will slow down from an average growth rate of 2.200 % per year in the previous decade to 1.800 % per year, which is mainly attributed to slower growth rates in Latin American countries, especially Brazil.
Poultry production, which increased by 14 % per year over the last decade, are estimated to average growth in the 2 % per year range to 2021. In all, 77% of the additional meat production surge during the period to 2021 will be accounted for by developing countries. Poultry production will remain in its growing course at the fastest rate, 2.200% per year, in comparison to other meats at the close of the same period with the highest production volume in the meat industry. As with demand for eggs, much of the global projection of consumption of meat is to make up 56 percent of the increase in meat demand between 2009-11 and 2021. The rise in meat consumption globally between 2009-11 and 2021 will also influence and shift the consumers’ choice for goods.
The increase in demand for poultry and poultry products was as a result of high interest in its production and consumption (Colecraft et al., 2007). Relatively, poultry production has a shorter gestation period compared to other livestock such as goats, sheep, and cattle (Obi & Sonaiya, 1995). In 20 years, there is going to be an increase in the global demand for poultry by more than 6% (Watt Executive Guide, 2012).
In the southern region of Africa, South Africa is the largest producer of broilers. Its production represents 1.5 percent of global poultry meat production. In the sub-region, South Africa’s poultry production makes up about eighty percent of broiler production (Sikuka & Torry, 2016). Global trends indicate that Africa is the new ready ground for colossal investment in poultry (Rabobank report, 2014).
Poultry and poultry products are a relatively cheaper packed source of protein (Kwadzo et al., 2013), resulting in high consumption of poultry and poultry products in Africa (Shane, 2006; Killebrew and Plotnick, 2010). Poultry meat eating is very high in countries such South Africa, Morocco, Egypt and Nigeria (FAOSTAT, 2006) and yet production volumes remain very low in
Africa (Watt, 2010). Poultry and poultry products are considerably important to human beings. It is an important source of income, food and employment (Anang et al., 2013). The poultry industry in Ghana remains a major contributor to the Ghanaian economy as it employs many people and also improves food and nutrition security. There has been a major increase in the consumption of broiler meat in Ghana over the years (Johnson and Kufoalor, 2017). Less than 10 percent of the broiler meat consumption in Ghana is accounted for by local production (USDA, 2013). The population and housing census of 2010 reveals that 14,000000 birds are raised in the country as against 14,600000 recorded in the 1996 showing a huge reduction in production. This decline has serious negative effects on the maize and soybean sectors because the two sectors are directly linked to the poultry industry (SEND-Ghana, 2008).
Ghana’s domestic consumption of chicken has seen an exponential growth by almost a factor of four (400%). This has resulted in a remarkable rise in market for poultry and poultry products in the country from 2000 to 2009 according a report of the Ministry of Food and Agriculture (MoFA, 2010). However, with this expansion in Ghana’s domestic market for poultry, the industry was not able to meet the demand (Khor, 2006). In the poultry production process, the feeding component represents seventy to seventy-five percent of the total cost of production (Sumberg et al., 2013). The constraints holding back the growth and competitiveness of the broiler industry are high costs of production, inefficient production methods, financing, institutional arrangements, restricted information of current poultry keeping, absence of value addition facilities and high energy prices (Killebrew & Plotnick, 2010; Kwadzo et al., 2013). Across the continent of Africa in general, some basic constraints are principally common to the poultry industry. Killebrew and Plotnick (2010) indicated that significantly huge costs associated with the poultry business, as well as glitches across Africa related to hygiene and poor know-how in rearing birds (operations and management)
and marketing issues are general constraints. (Dupaigre et al., 2004) also held the view that the challenge with acquiring inputs, high veterinary service charges and occurrence of diseases are hindrances to poultry farmers across Africa. Countries like Brazil and the United States of America enjoy very low costs of broiler production because of the low cost of feed (Davis et al., 2013). Globally, the relationship between the feed sector and broiler production is well established and acknowledged (Shiferaw et al., 2011).
Johnson & Kufoalor (2017) noted that it is far from being achieved as a short term industrial goal for the Ghanaian broiler industry to replace the import of frozen chicken with home grown broiler meat by domestic broiler businesses. This however is a long term industrial goal requiring a strong foundation for competitiveness of the industry to be achieved over a period. Due to feed which is contributing the biggest share to the cost of producing broilers, it is the interest of this study to understand how feed can be manipulated to reduce cost of production towards the competitiveness of broiler production in Ghana.
In Ghana, the use of mash feed by broiler producers is widespread and will require evidence-based information supported by results to get them to buy into the new technology. This must be combined with the innovation to reduce drastically the high cost of production. Technology and innovation have produced crumbled feed forms which could be used in the production of broilers to verify their performance, how and what they contribute to cost reduction in broiler production. Feed prices is one of the two most influential factors on which the meat market is going to heavily depend on from the year 2012. Global food price is one of the factors driving the feed price increase (Watt Executive Guide, 2012).
Experimental economics deploys experimental approaches to evaluate theoretical predictions of economic behaviour. It is based controlled, scientifically-designed experiments to test economic
theories applied to laboratory settings. Typical empirical research is restricted in term of its ability to measure only a subgroup of the group of all the likely effects that impact (or can be observed to be affecting) economic decision making; therefore, the ability to control for certain effects is limited or non-existent. With experiments, economists can for example fix some factors of production and measure the effects of the other factors in a way that allows ceteris-paribus comparisons.
The improvement of the productivity of two heavily interlinked sectors (maize-feed and poultry sectors) of the Ghanaian agriculture have been the subject of policies and programmes, and most of the times the competitiveness of the poultry sector compared to the imported frozen meat is the focus of development policy discussions (IFPRI, 2017). To therefore know how broiler production cost should be reduced to underpin the competitiveness of poultry production and that of the whole Ghanaian poultry industry, research must provide concrete intelligence on technologies to invest in regarding housing, management and feed as this study has set out assess the cost reduction contribution of the crumbled feed technology.
Problem Statement
Competition from imported chicken meat is one of the major challenges of Ghana’s broiler industry (Tuffour & Sedegah, 2013). Broiler producers are not able to produce at a cost frontier that enables them to be competitive at the prevailing market price. Most poultry farmers who are in the business of broiler production in Ghana have either shifted to egg production or have completely discontinued their broiler businesses as a result of the array of problems facing the industry. Among the challenges facing the producers of broiler in countries where the industry is struggling include high levels of importation of broiler meat, uncompetitiveness and the high cost of feed (Tuffour & Sedegah, 2013; Akunzule, 2014). Among the components of the total cost of
production which include fixed costs (costs of housing, feeding and drinking troughs, water reservoirs, wellington boots, equipment and permanent labour) and variable costs (feed, drugs, veterinary service charges and electricity), feed cost is noted to be very high. Confirming this, Johnson and Kufoalor (2017) reported that feed cost as a variable cost component, represents 70 – 75% while Akunzule (2014) reported 60 – 70% as the proportion feed cost in the total cost of broiler production. Literature on global, regional and national poultry farming indicate that cost of feed exerts a lot of pressure on the industry, and this has serious implications on profitability and on the pattern, scale and rate of production ( Watt Executive Guide, 2012; Watt, 2010).
Feed is the driver and the sustainer of the broiler industry (Watt Executive Guide, 2012; Global Poultry Trends, 2014). High feed cost influences the total cost of production which is inextricably linked to the uncompetitiveness of the industry and this in turn fosters importation. In view of the high cost of feed, there is the need for combined efforts of technology and innovation to reduce cost of production. The question that one will ask is, “what will be the variation in the total cost of production should the unit price of feed go up?” especially in a country, Ghana, where it is really difficult for the price of poultry feed to decrease because there is a competition for maize (the major poultry feed component) between human consumption and the feed industry.
Crumbled feed is a type of feed fed to farm animals including broiler. It is a granular form of feed ranging from 1.81 mm to 2.3 mm in diameter. Crumbles are obtained by first compacting feed into pellets and broken into smaller sizes. Mash feed is the feed type with fine particles. All argument scan be made, however, if it does not make economic sense to the broiler producer, it will be rejected. Economics are as well affected by the performance of the broiler birds. Ioannis Mavromichalis (March 12, 2014). Due to the pecking nature of birds, they show so much preference to big particles in feed in proportion to the size of their beak (Portela et al., 1988). There
is paucity of comprehensive study in literature of either crumbled or pelleted feed-use in Ghana by broiler producers. This scarcity of studies on the use crumbled or pelleted feed by broiler producers in Ghana implies that mash feed is the most commonly used feed form by broiler farmers throughout Ghana. It is also the most patronized feed form in Ghana by poultry producers. Studies on the broiler industry in Ghana do not explore the benefits from the use of crumbled feed such as reducing or savings made in the cost of production and increasing returns as reported in other countries. The crumbled feed is reported in many countries to contribute to cost reduction, profitability, better feed conversion ratio (FCR) and improving weight gain of broilers. Feeding crumbles to broiler birds is accepted to massively improve their performance, feed conversion ratio (FCR) and feed intake (Dozier et al., 2010; Chehraghi et al., 2013; Lv et al., 2016). Per the many studies that were carried out in many countries either than Ghana, findings reported that in comparing the performance of mash feed to that of the crumbled feed, birds showed greater preference to the crumbled feed with zero fine. It is also reported that the crumbled feed form mostly yields superior weight gain compared to mash (Zohair et al., 2012).
The birds reach market weight faster under crumbled feed than under mash feed. In placing monetary value on the added benefits of crumbled feed use to broiler businesses as contribution to cost reduction, it will be of great importance as it could drive low cost production of broiler in the Ghanaian broiler industry if adopted gain (Neves et al., 2014).
